Amid widespread speculation and debate, US-based Hindenburg Research, known for its controversial short-selling practices, has decided to cease operations. The closure has raised questions about the firm’s practices, its impact on markets, and the possible reasons behind this sudden move. Hindenburg Research made international waves with allegations against billionaire Gautam Adani in January 2023 that wiped billions from the market value of his group companies.

The Adani Group had earlier denied all allegations against it. Commenting on this, the Congress party general secretary in charge of communications, Jairam Ramesh, said its closure does not mean a clean chit for “Modani”. He added that the report covered only one part of securities law violations, that is, the “hydra-headed Modani Mega Scam”.

“The matter goes far deeper. It involves the abuse of Indian foreign policy to enrich the PM’s close friends at the expense of the national interest. It involves the misuse of investigative agencies to force Indian businesspersons to divest critical infrastructure assets and help Adani build monopolies in airports, ports, defence and cement,” Ramesh alleged.

Senior Advocate Mahesh Jethmalani and other prominent legal experts have strongly criticised Hindenburg Research’s decision to disband, branding it a “run for cover” in light of alleged connections to financier George Soros. Advocate PR Ramesh, a prominent lawyer and expert in SEBI-related matters, said, “The show-cause notice issued by SEBI and the ongoing investigations could have played a role in the shutdown of Hindenburg Research. It is crucial for authorities to thoroughly investigate whether there was any conspiracy to deliberately destabilise Indian markets.”

Former Chief Information Commissioner YK Sinha said, “If I say I was surprised, that would not be an accurate assessment because I think things have changed since this rather politically motivated report started coming out from Hindenburg.” He added that there was “an agenda behind…to bring down reputed groups and companies…”.

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The BJP slammed Hindenburg Research after it announced its decision to shut operations, alleging that the US-based short-seller’s reports were “supari” (contracts) taken against India’s rising economic power. BJP spokesperson Shehzad Poonawalla alleged that Hindenburg’s report was a sponsored, organised, orchestrated, and manipulated act of economic anarchism and economic terrorism.

Ajay Bagga, former senior banker, said that Hindenburg Research operated in a legally ambiguous area, publishing negative reports on companies and simultaneously taking short positions against them. These activities often involved partnerships with hedge funds that did not disclose their positions, raising concerns about transparency and market manipulation.

Bagga also noted that short-selling rarely yields sustained profits. While a few short-sellers gained fame during crises like the 2008 financial meltdown, the majority struggled to achieve consistent returns. He added that is why the few who do, as in 2008, are celebrated so much. All this could have made Hindenburg’s business model financially unviable in the long run. He also highlighted that there is speculation that regulatory action might have played a role in Hindenburg’s shutdown.

To avoid penalties, the firm has decided to close its operations quietly. If regulatory or legal proceedings are ongoing, the expert hopes for accountability to ensure that such practices are not repeated. Hindenburg’s targeted reports often inflicted significant damage on companies, their promoters, and broader markets. These reports, while marketed as truth-seeking endeavours, were criticised for being financially motivated attacks designed to benefit the firm and its collaborators.

Bagga said that, unlike activist investors who openly push for corporate reforms or traditional short-sellers relying on fundamental analyses, Hindenburg’s approach was seen as predatory. He emphasised that while short-sellers can contribute to market integrity by exposing flaws, Hindenburg’s “hatchet jobs” caused widespread value destruction.

Before Trump’s second term

The announcement of the closure by Nate Anderson, 40, who started Hindenburg in 2017, came just days before Donald Trump’s inauguration as the new US President. “There is not one specific thing—no particular threat, no health issue, and no big personal issue,” Anderson wrote in a letter posted on the firm’s website on January 15. “The intensity and focus have come at the cost of missing a lot of the rest of the world and the people I care about. I now view Hindenburg as a chapter in my life, not a central thing that defines me.” But critics were quick to link the shutting down of Hindenburg’s alleged ties with George Soros and being under significant pressure from the incoming Trump administration.

Adani Group CFO Jugeshinder Robbie Singh in a cryptic post on X said: “Kitne Ghazi Aaye, Kitne Ghazi Gaye [How many warriors came, how many warriors went”]”.

Hindenburg, in January 2023, published a report accusing the Adani Group of “pulling the largest con in corporate history,” wiping out more than $150 billion in value of the group’s shares at their lowest point. Business tycoon Gautam Adani was ranked the world’s fourth-richest and Asia’s wealthiest person a day before the report was published. He slipped following the heavy selling witnessed in the group stocks.

Also Read | The latest chapter in the Adani stock imbroglio

On January 16, with a net worth of $75 billion, he was ranked at No.20, behind Mukesh Ambani (ranked 17th with $91.5 billion net worth).

The Hindenburg report against Adani led to a political storm in India. But as months passed, the Supreme Court dismissed a petition from litigators based on it while the Adani Group recovered lost ground with strong operating performance and stock recovering most of the losses.

(With inputs from agencies)